Almost Time for Mysterious Greek Bond Buyer to Exit Stage Left

Time’s almost up for Japonica Partners, the mysterious U.S-based investment company that raised eyebrows when it offered to buy Greek government debt.

The little-known firm, whose claims to fame include a hostile takeover bid for rail company CNW Corp in 1989 and the turnaround of Sunbeam Corp in the early 1990s, is coming up against a self-imposed deadline. Thursday is the last day that holders of Greek debt can sell those bonds to Japonica for 40 cents on the euro.

Since then, though, Greek debt has rallied. The Greek government bond maturing in 2023 is currently trading at a price of around 58 cents on the euro and the Greek 2033 bond trading at around 44 cents, according to Tradeweb. Back in early July, those prices were 54 and 43, respectively.

A Japonica representative refused to comment when asked if the firm had already purchased any bonds from investors.

With the offer scheduled to expire, Japonica is expected to release a press statement about the offer on Thursday, according to a spokesperson for the company.

Japonica has not been involved in any major deals in financial markets for almost two decades.

Traders say that Japonica’s offer has had little, if any, impact on the trading of Greek debt. Japonica’s July 1 offer was revised down from an earlier offer of 45 cents on the euro. After the original offer was made, Greek debt traded below 45 cents, highlighting bond investors’ reluctance to rely on Japonica as a backstop.

If the markets genuinely believed in the ability of Japonica to buy bonds at the indicated price, investors would have sold bonds to Japonica instead of selling them at a lower price to other traders.

“The bid hasn’t really proved a reliable floor for the market,” noted Dimitris Drakopoulos, an economist at Nomura in London. “Some Greek bonds have traded below Japonica’s price which questions the credibility of the offer.”

While Japonica’s bid is a minimum bid and the company is able to negotiate a higher price with any potential seller, it is unlikely that the company has bought much paper if the lowering of the original bid is any indication of the company’s willingness to own Greek debt.

“If they (Japonica) haven’t been able to do anything by now, it is doubtful if they will be able to do anything in the future,” said Mr. Drakpoulos. “Funds who have bought this paper are looking to closer to 55-60 cents” to sell Greek bonds, “not at 40 or 45 cents.”